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Xerox Responds to Carl Icahn and Darwin Deason Open Letter

Xerox
(NYSE:XRX) today issued the following letter from its Board of Directors
to its shareholders in response to the February 12, 2018 letter from
Carl Icahn and Darwin Deason:

***

The Board of Directors (the "Board") of Xerox Corporation ("Xerox" or
the "Company") has reviewed the February 12, 2018 letter signed by Carl
Icahn and Darwin Deason (the "Letter"). To date, the Board has chosen
not to engage in a public debate with our two large shareholders.
However, we believe their misleading and inaccurate Letter warrants a
written response to ensure the facts are clear for all Xerox
shareholders.

The proposed combination
of Xerox and Fuji Xerox (the "Transaction"), announced on January
31, 2018, followed a year-long comprehensive and exhaustive review of
value-enhancing alternatives available to the Company. That review found
that the Transaction, as currently proposed, delivers significantly more
value to Xerox shareholders than would be achievable on a standalone
basis.

Mr. Icahn and Mr. Deason propose that Xerox shareholders reject this
value-creating Transaction in favor of putting Xerox's future and the
investment of its shareholders at risk. Their attacks on Xerox have been
premised on removing:

a Xerox management team that is successfully improving performance at
Xerox, including significant outperformance relative to its own
aggressive goals for the Company's Strategic Transformation;

members of a Xerox Board that are taking significant actions to secure
the future of the Company; and

a Fuji Xerox joint venture agreement with no viable alternatives to
account for the value-destruction that would result.

We will take each of the Letter's mischaracterizations in turn:

CLAIM #1: The Transaction undervalues Xerox and
favors Fujifilm.

FALSE. Mr. Icahn and Mr. Deason suggest through suspect math that
investors are "selling control of Xerox for a cash flow multiple barely
exceeding 2.3x." This analysis is just plain wrong. As discussed in
prior presentations to investors, Xerox shareholders receive in the
Transaction (i) a $2.5 billion dividend at closing; (ii) 49.9% of the
combined Xerox and Fuji Xerox; and (iii) 49.9% of the benefit of the
value created from at least $1.7 billion of annual cost savings,
including $1.25 billion in cost synergies that are only achievable via
this Transaction. These calculations are highlighted on page 4 in the
supporting materials accompanying this letter.

A foundational driver of this Transaction is that combining Xerox with
Fuji Xerox will create a company that has a significantly-enhanced
competitive position and will, for the first time, be able to fully
realize the benefits of industry-leading scale and global reach. Our
shareholders will have the opportunity for significant participation in
this value creation, which Mr. Icahn and Mr. Deason conveniently ignore.

As shown on page
5 of the supporting slides, additional value is being transferred to
Xerox shareholders by virtue of the pro forma ownership achieved in the
Transaction. On the basis of implied relative value of Xerox and Fuji
Xerox, Xerox shareholders would own 42%-46% of the combined company,
compared to the 49.9% they receive in the Transaction. Based on a $9.4
billion equity valuation of Fuji Xerox (implied by the midpoint of 7x -
8x Fuji Xerox 2018E EBITDA), Xerox shareholders are receiving more than
a 15% premium to Xerox's unaffected share price, before any value
attributed to synergy realization.

Finally, the assertion that the "one-time special dividend [is] financed
with our own assets" is misleading. Although it is not contributing
cash, Fujifilm, as owner of 50.1% of the combined company, will bear the
debt incurred to finance the dividend as the combined company will be
fully consolidated by Fujifilm without receiving any portion of that
dividend.

FALSE. Mr. Icahn's and Mr. Deason's suggestion of "freeing the
company from the shackles of the Fuji Xerox joint venture" is not a
viable strategy. The joint venture between Xerox and Fujifilm has
existed in various forms since 1962. The current structure dates to
2001, when Fujifilm acquired additional shares in the joint venture to
bring its ownership to 75%. The agreement is a binding legal document
that cannot be simply wished away, renegotiated or dissolved because Mr.
Icahn and Mr. Deason desire it so.

Through the joint venture, Xerox annually buys approximately $1.6
billion of equipment, parts and consumables, including more than
two-thirds of Xerox's equipment needs. It is important to note that Fuji
Xerox is the only potential supplier that is not a direct competitor of
Xerox and would therefore be aligned in its interests to provide
competitive pricing for those materials.

Walking away from the joint venture would require Xerox to completely
rebuild its supply chain and manufacturing infrastructure, which would
be extremely expensive, result in significant disruptions to our
business and customer relationships, and take years to implement.
Ultimately, this would be highly destructive to Xerox's competitive
positioning and shareholder value.

Mr. Icahn knows this because his representative, Jonathan Christodoro,
served on the Xerox Board between June 2016 and December 2017. During
that time, he and Mr. Icahn had full access to all documents governing
the joint venture, as did Mr. Deason at the time he sold his company,
ACS (News - Alert), to Xerox. These documents have since been publicly disclosed. For
any of them to assert that these agreements were "shrouded in mystery"
is disingenuous, at best.

CLAIM #3: Xerox shareholders will become
passive minority owners, with no opportunity to receive a control
premium.

FALSE. Xerox's Board negotiated strong minority protections to
ensure that the rights and value of current shareholders remain
protected after the Transaction closes. These were detailed in our
February 9 presentation to shareholders and include, among other things,
that the combined company Board will initially consist of 12 directors,
including seven designated by Fujifilm and five independent directors
designated by the current Xerox Board. The five independent Xerox
designated directors will serve for five years or select their
replacements. Thereafter, they may be replaced by independent directors
selected by Fujifilm and reasonably acceptable to the then-serving
independent directors.

Jeff
Jacobson will represent one of the seven Fujifilm Board designees
and serve as CEO of the combined company.

In addition, the Transaction includes extensive contractual provisions
that protect the existing Xerox shareholders. Among other protections,
these provisions limit the ability of Fujifilm to engage in interested
party transactions and to obtain disparate consideration in connection
with a future sale.

Perhaps more importantly, inherent in Mr. Icahn's and Mr. Deason's
statement is the assumption that Xerox is foregoing a more attractive
control premium than an unidentified third part may someday be prepared
to pay.

While Fujifilm controls the existing Fuji Xerox joint venture, Xerox has
a number of governance rights that it would lose if Xerox were to be
acquired by or combined with one of a number of "named competitors."
Indeed, the joint venture would be terminable by Fujifilm in such an
event, even though Fuji Xerox's exclusive distribution rights in Fuji
Xerox territories would remain through 2021.

We believe the existence of the Fuji Xerox joint venture negatively
impacts value in any other merger transaction. More likely, it would
simply make such a transaction unattractive to any other strategic
buyer. It is also not something that needs speculation: since the public
speculation of a potential transaction with Fujifilm on January 10,
2018, no potential strategic buyer contacted Xerox, or its advisors,
with any credible proposal or alternatives.

CLAIM #4: Projected synergies can be realized
without consummating this Transaction.

FALSE. As we made clear numerous times in our disclosures, of the
$1.7 billion in total annual cost reductions by 2020, $1.25 billion is
related to what we can achieve only by integrating the two companies,
while the remaining $450 million comes from a Fuji Xerox-specific cost
reduction program. All of these amounts are incremental to Xerox's
ongoing Strategic Transformation. We are targeting to achieve
approximately $1.2 billion of the $1.7 billion total annual cost savings
by 2020, and the vast majority of cost savings are expected to flow
through to the bottom line.

Both Xerox and Fujifilm have a proven track record of executing
significant transformations in the past, and are fully committed to
realizing the full synergy upside from the combined company. The current
Xerox management team has outperformed its cost transformation targets
this past year and will not settle for anything less going forward.

The compelling Transaction synergies extend far beyond typical corporate
overhead cost reductions cited in most similar transactions, and are
grounded in the highly complementary nature of the two businesses based
on detailed, bottoms-up analysis. These include capturing manufacturing
efficiencies, optimizing consumables production and integrating R&D
capabilities to capitalize on best of breed technologies. Moreover, the
combination creates a global industry leader with significant revenue
growth opportunities that were far less certain and actionable for Xerox
shareholders on a standalone basis, including $1.0 billion in revenue
synergy opportunities already identified.

CLAIM #5: Xerox's revenue and margins have
continued to decline in the last three years.

FALSE. Xerox recently announced that margins increased from 12.5%
in fiscal year 2016 to 12.8% in fiscal year 2017. Moreover, the margins
we have recently delivered are the highest the Company has seen in
years. Only one other company in our industry has been able to
consistently demonstrate double-digit margins.

As Mr. Icahn is well aware, we have been successfully executing on the
comprehensive strategy initially announced in December 2016 - which we
note was developed and approved during Mr. Christodoro's board tenure.
We have since overachieved on our Strategic Transformation targets,
delivering $1.3 billion of total savings through 2017 and have made
significant progress strategically reorienting the revenue trajectory
towards growth. Revenue attributable to strategic growth areas increased
by 5% in the fourth quarter of 2017 through successful new product
launches and channel expansion, particularly in the SMB market.

Our full-year 2017 results clearly demonstrate that the strategy we have
implemented is working as we met or exceeded every financial metric we
guided to in 2017 - Adjusted EPS was above Xerox's guidance range;
Strategic Transformation was $80 million higher than expected; Adjusted
Operating Cash Flow was above the midpoint of Xerox's guidance range;
and revenue was within Xerox's guidance range.

In conclusion, Mr. Icahn and Mr. Deason fail to provide an actionable
plan or any cogent ideas to make their scheme a reality. Following their
playbook would be both highly irresponsible and unlikely to succeed,
particularly given the terms and constraints of the existing Fuji Xerox
joint venture agreement, and the realities of today's competitive
environment.

The combination of Xerox and Fuji Xerox will create a stronger, more
competitive company with enhanced growth prospects. The opportunity for
Xerox shareholders to benefit from ownership of the combined company, as
well as the substantial dividend to be paid upon closing, represents the
creation of significant value for Xerox shareholders. The Board remains
committed to maximizing value for all shareholders and securing the
future of Xerox.

***

Additional Information and Where to Find It

This filing may be deemed to be solicitation material in respect of the
transaction with FujiFilm described herein (the "Transaction")
and/or the matters to be considered at the Company's 2018 Annual
Meeting. In connection with the Transaction and the 2018 Annual Meeting,
Xerox plans to file with the Securities and Exchange Commission ("SEC (News - Alert)")
and furnish to Xerox's shareholders one or more proxy statements and
other relevant documents. BEFORE MAKING ANY VOTING DECISION, XEROX'S
SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT(S) IN THEIR ENTIRETY
WHEN THEY BECOME AVAILABLE AND ANY OTHER DOCUMENTS TO BE FILED WITH THE
SEC IN CONNECTION WITH THE TRANSACTIONS AND/OR THE COMPANY'S 2018 ANNUAL
MEETING OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENTS BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTIONS AND/OR
THE COMPANY'S 2018 ANNUAL MEETING AND THE PARTIES RELATED THERETO.
Xerox's shareholders will be able to obtain a free copy of documents
filed with the SEC at the SEC's website at http://www.sec.gov.
In addition, Xerox's shareholders may obtain a free copy of Xerox's
filings with the SEC from Xerox's website at http://www.xerox.com
under the heading "Investor Relations" and then under the heading "SEC
Filings."

Participants in the Solicitation

The directors, executive officers and certain other members of
management and employees of Xerox may be deemed "participants" in the
solicitation of proxies from shareholders of Xerox in favor of the
Transaction or in connection with the matters to be considered at the
Company's 2018 Annual Meeting. Information regarding the persons who
may, under the rules of the SEC, be considered participants in the
solicitation of the shareholders of Xerox in connection with the
Transaction or the Company's 2018 Annual Meeting will be set forth in
the applicable proxy statement and other relevant documents to be filed
with the SEC. You can find information about Xerox's executive officers
and directors in Xerox's Annual Report on Form 10-K for the fiscal year
ended December 31, 2016, Xerox's and such persons' other filings with
the SEC and in Xerox's definitive proxy statement filed with the SEC on
Schedule 14A.

Cautionary Statement Regarding Forward-Looking Statements

This report, and other written or oral statements made from time to time
by management contain "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. The words
"anticipate", "believe", "estimate", "expect", "intend", "will",
"should" and similar expressions, as they relate to us, are intended to
identify forward-looking statements. These statements reflect
management's current beliefs, assumptions and expectations and are
subject to a number of factors that may cause actual results to differ
materially. Such factors include but are not limited to: our ability to
address our business challenges in order to reverse revenue declines,
reduce costs and increase productivity so that we can invest in and grow
our business; changes in economic and political conditions, trade
protection measures, licensing requirements and tax laws in the United
States and in the foreign countries in which we do business; changes in
foreign currency exchange rates; our ability to successfully develop new
products, technologies and service offerings and to protect our
intellectual property rights; the risk that multi-year contracts with
governmental entities could be terminated prior to the end of the
contract term and that civil or criminal penalties and administrative
sanctions could be imposed on us if we fail to comply with the terms of
such contracts and applicable law; the risk that partners,
subcontractors and software vendors will not perform in a timely,
quality manner; actions of competitors and our ability to promptly and
effectively react to changing technologies and customer expectations;
our ability to obtain adequate pricing for our products and services and
to maintain and improve cost efficiency of operations, including savings
from restructuring actions; the risk that individually identifiable
information of customers, clients and employees could be inadvertently
disclosed or disclosed as a result of a breach of our security systems;
reliance on third parties, including subcontractors, for manufacturing
of products and provision of services; our ability to manage changes in
the printing environment and expand equipment placements; interest
rates, cost of borrowing and access to credit markets; funding
requirements associated with our employee pension and retiree health
benefit plans; the risk that our operations and products may not comply
with applicable worldwide regulatory requirements, particularly
environmental regulations and directives and anti-corruption laws; the
outcome of litigation and regulatory proceedings to which we may be a
party; the risk that we do not realize all of the expected strategic and
financial benefits from the separation and spin-off of our Business
Process Outsourcing business; the effects on our business resulting from
actions of activist shareholders; and other factors that are set forth
in the "Risk Factors" section, the "Legal Proceedings" section, the
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" section and other sections of our Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2017, June 30, 2017 and
September 30, 2017 and our 2016 Annual Report on Form 10-K, as well as
our Current Reports on Form 8-K filed with the SEC. Furthermore, the
actual results of the Transaction could vary materially as a result of a
number of factors, including, but not limited to: (i) the risk that the
Transaction may not be completed in a timely manner or at all, which may
adversely affect Xerox's business and the price of Xerox's common stock,
(ii) the failure to satisfy the conditions to the consummation of the
Transaction, including the receipt of certain approvals from Xerox's
shareholders and certain governmental and regulatory approvals,
(iii) the parties may be unable to achieve expected synergies and
operating efficiencies in the Transaction within the expected time
frames or at all, (iv) the Transaction may not result in the accretion
to Xerox's earnings or other benefits, (v) the occurrence of any event,
change or other circumstance that could give rise to the termination of
the Transaction agreements, (vi) the effect of the announcement or
pendency of the Transaction on Xerox's and/or Fujifilm's business
relationships, operating results, and business generally, risks related
to the proposed Transaction disrupting Xerox's current plans and
operations and potential difficulties in Xerox's employee retention as a
result of the Transaction, (vii) risks related to diverting management's
attention from Xerox's ongoing business operations, (viii) the outcome
of any legal proceedings that may be instituted against Xerox, its
officers or directors related to the Transaction agreements or the
Transaction and (ix) the possibility that competing offers or
acquisition proposals for Xerox will be made. Xerox assumes no
obligation to update any forward-looking statements as a result of new
information or future events or developments, except as required by law.

Fuji Xerox is a joint venture between Xerox Corporation and Fujifilm in
which Xerox holds a noncontrolling 25% equity interest and Fujifilm
holds the remaining equity interest. In April 2017, Fujifilm formed an
independent investigation committee (IIC) to primarily conduct a review
of the appropriateness of the accounting practices at Fuji Xerox's New
Zealand subsidiary and at other subsidiaries. The IIC completed its
review during the second quarter 2017 and identified aggregate
adjustments to Fuji Xerox's financial statements of approximately JPY
40 billion (approximately $360 million) primarily related to
misstatements at Fuji Xerox's New Zealand and Australian subsidiaries.
We determined that our share of the total adjustments identified as part
of the investigation was approximately $90 million and impacted our
fiscal years 2009 through 2017. We concluded that we should revise our
previously issued annual and interim consolidated financial statements
for 2014, 2015 and 2016 and the first quarter of 2017 the next time they
are filed. Our review of this matter has been completed. However,
Fujifilm and Fuji Xerox continue to review Fujifilm's oversight and
governance of Fuji Xerox as well as Fuji Xerox's oversight and
governance over its businesses in light of the findings of the IIC. At
this time, we can provide no assurances relative to the outcome of any
potential governmental investigations or any consequences thereof that
may happen as a result of this matter.